Coverage: Amazon ready to offer streaming music

Not to be left out, Amazon is reportedly ready to roll out a streaming music service as part of its Prime service. Whether it will be able to attract people away from others like Spotify remains to be seen.

Ben Sisario had these details in The New York Times:

Amazon is planning to introduce a limited music streaming feature as early as this week, according to several people briefed on the company’s plans.

The new feature, which has been rumored in the music industry for months, will give subscribers to Amazon’s Prime service access to thousands of songs free and without interruptions from advertising. But it will omit most new releases, and will not include the catalog of the Universal Music Group, the world’s largest music company, according to these people, who spoke on the condition of anonymity.

Amazon, already one of the biggest retailers of music downloads, is adding the streaming feature as a sweetener for its Prime customers, whose annual subscription fee was recently raised to $99 from $79. Prime subscribers get free shipping on orders as well as other perks like free access to some movies and television shows. The new music feature will offer a wide but limited selection of titles, and for the most part will not include current hits.

An Amazon spokeswoman did not immediately respond to a request for comment on Wednesday.

The New York Post story by Claire Atkinson pointed out that Amazon was working to compete with other large music streaming services:

Chasing Apple’s recent $3 billion deal to acquire Beats Music, the online giant is throwing its hat in the ring. Google is also in talks to acquire Songza, another streaming music service.

The new Amazon music service will be available to those who subscribe to Amazon Prime, its paid shopping membership option, sources told The Post. Amazon Prime costs $99 and also offers a streaming video service that competes with Netflix.

Business Insider pointed out it was just a way for Amazon to get people to sign up for Prime, especially since it wouldn’t have as large a selection as other services, Jillian D’Onfro wrote:

Although it won’t have as much music as larger, more focused streaming competitors like Spotify or Pandora, Amazon’s service will be just another way for the company to try to entice people to sign up for its $99 Prime service. Prime members tend to spend almost double what non-members do on Amazon, so it’s in the company’s favor to make the two-day free shipping service as attractive as possible.

Music streaming is becoming increasingly competitive. Apple just bought Beats for $3.2 billion in part because of its subscription music streaming service. iTunes downloads have suffered as people have turned to apps like Pandora to stream music for free. Pandora is on track to have $1 billion in revenues annual. Spotify has perhaps $1.2 billion in revenues. There are rumors that Google was thinking of buying Songza.

Amazon has also recently been beefing up its video streaming content. Selling digital content — be it movies, television shows, books, or music — instead of its physical counterparts, lets the company save money in storage and shipping.

This move also makes sense now because Amazon is likely releasing its own smartphone next week. BGR reported in April that the company is planning to offer a unique wireless data plan, called Prime Data. Although BGR’s sources couldn’t confirm exact details, it’s speculated that Prime Data could take advantage of AT&T’s “sponsored data plan” to let phone owners use various Prime-branded services — like TV and movies from Prime Instant Video and music from this s soon-to-be-released streaming service — without using up any of their data. For example, listening to music from Amazon’s Prime streaming service wouldn’t count towards the user’s monthly data cap.

Now that’s compelling, streaming on multiple devices for truly a flat fee. But the limits to the music service stem from licensing problems, according to TechCrunch’s Darrell Etherington:

The reason Amazon’s streaming service will be more limited is said to be due to a failure to come to terms in licensing negotiations, since the music companies considered Amazon’s rate offerings too low. The financials for Amazon included the opportunity to share in a $5 million royalty pool for smaller labels, and larger one-time payments for big publishers like Sony and Warner Music, in exchange for a year of access rights. It isn’t clear what the final cost to Amazon for licensing fees ended up being.

Amazon currently has somewhere around 20 million Prime subscribers according to the company’s own statement from late last year. It’s a big-margin business for Amazon, so growing that segment makes a lot of sense, and small incentives can help the overall package look far more enticing, even if viewed in direct comparison to other paid streaming services, Amazon’s doesn’t sound like it will stack up all too well.

It seems like Amazon has little to lose by offering the service and could become even more of a go-to for Prime customers, which is the point. What isn’t clear is if this will inspire confidence in investors or if it will help the music industry. Streaming services already pay little for some music, and Amazon undercutting prices can’t be good for artists.